Tips for Buying Luxury Real Estate

6 April 2016, 3:00 pm

Across the United States, sales of luxury homes have been hitting records. The number of California homes selling for $2 million or more, for example, reached an all-time high in 2013, as the state rebounded from the foreclosure crisis. The U.S. is not the only place seeing bitg sales of luxury homes. Vancouver, Canada’s priciest real estate market, saw a record 36% increase in 2013 over the previous year on sales of homes priced over $2 million.

Prices for luxury real estate have also seen significant increases over the last couple of years. According to Knight Frank’s Prime Global Cities Index, which tracks luxury real estate in 30 metropolitan markets around the world, the hottest luxury market now is Jakarta, which saw price increases of nearly 38% at the end of 2013 over the previous year. Knight Frank defines luxury real estate as homes that were sold in the top five percentile in terms of value. Other double-digit price increases in the last quarter of 2013 over the same quarter 2012 include Dublin (17.5%), Beijing (17.1%), Dubai (17%), Los Angeles (14%), Tel Aviv (12.7%), Bangkok (12.3%), San Francisco (10.4%) and New York (10.4%).

Why the Growth?

It may seem incongruous that luxury markets are heating up, given that much of the world is still recovering from the 2008 financial crisis. Like the financial markets, the real estate market operates under the law of supply and demand. And by nature, there are a limited number of luxury homes for sale at any given time in a particular market. That limited inventory alone can help drive up prices as multiple buyers bid on a single luxury property.

Strong Job Market

In many metropolitan markets, such as Denver, low unemployment rates coupled with well-paying jobs have fueled the luxury real estate market. Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado, said, “We have never seen this kind of frenzy in luxury home sales before. The strongest single market segment for 2013 was clearly the luxury home market. If you include the sales of properties priced at over $500,000 – the top 10% of the market – we saw an increase of 44% year over year.”